Author Jake Halpern goes undercover as a debt collector and uncovers a world of rich characters, conflicts and unsavory behavior
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Trying to make sense of an industry that’s often reviled but rarely experienced firsthand, for reasons that quickly became apparent to him while researching “Bad Paper: Chasing Debt from Wall Street to the Underworld.”
Halpern, a frequent contributor to The New Yorker, The Wall Street Journal and NPR’s All Things Considered, didn’t wade into these dark alleys with a book or even a story in mind. Instead, he was merely curious when his mother, “a lawyer and certainly no shrinking violet,” caved in and paid a small debt she didn’t owe after being hounded relentlessly by collectors. When he turned his research into a feature story for The New Yorker, Brad Pitt’s production company approached him out of the blue to develop it into an HBO series.
The Pitt connection bought Halpern entree into an Alice in Debtorland experience, with the unlikely collections team of former Wall Street banker Aaron Siegel and South Boston ex-con tough guy Brandon Wilson serving as his Cheshire cat and Mad Hatter.
Q: What was it about collections that intrigued you?
A: I had this idea to come at it from a different angle: What is it like to work in this business? Because what I heard is that the information that these guys were buying is often problematic. I wanted to see it from their perspective and make you understand them as human beings. My father has a plaque above his office wall that says, “Be kind, for everyone you meet is engaged in a great struggle.” That’s stuck with me over the years and it became the epigraph of my book.
Q: Certainly, Aaron Siegel preceded you down this rabbit hole. Why would a guy walk away from a promising career with Bank of America to chase past-due debt, aka “bad paper,” with an ex-con?
A: As Aaron put it, these inefficient markets are kind of the Holy Grail, where, if you can psyche them out or have an insider show you the way, you can make a fortune. It’s that famous Warren Buffett quote: “If the markets were efficient, I’d be a bum with a tin cup.” I think that’s what intrigued Aaron and his investors. The initial returns that he got, like 300 percent in three months, were just kind of jaw-dropping. The problem, of course, is that it’s highly volatile; the same thing that made it highly profitable also could get you robbed. It’s the Wild West.
Q: What peeled his eyes back to the harsh reality of collections?
A: Aaron told me he hired these collectors at first who seemed like upstanding, reputable types and realized he’d hired a bunch of Boy Scouts to do what he needed a bunch of hustlers to do. He realized he was going to have to get in bed with a whole range of characters that he would have previously considered unsavory; guys like Brandon, who spent 10 years in jail for armed robbery.
Q: What was it like to walk into Brandon’s shop for the first time?
A: I felt like I’d stepped onto the set of a Martin Scorsese movie. Basically, at all these agencies, it’s always feast or famine. If they get hold of really good paper, it’s very lucrative — for Brandon, who owns it, and for the collectors, who work on commission. But if they get paper that’s older and harder to collect on, it’s the opposite. The atmosphere there is kind of surreal.
Q: Indeed. His collectors even sleep upstairs, right?
A: Yes, at the end of the day, they literally go upstairs into what used to be this old hotel with these old claw-foot bathtubs. A lot of them were guys with criminal records and for one reason or another something had gone wrong in their life, and they kind of saw Brandon as their redeemer, a guy who had had his own past but was giving them this second chance. There was kind of a Robin Hood and his merry men feeling there.
Q: You tried your hand at working the phones. What was that like?
A: First, as soon as you get on the phones with these people, it’s totally apparent that these are not people who have money. I’m talking to senior citizens who are living on Social Security, or a woman who is bipolar, so part of you kind of cringes at having to collect on them. The other factor is, I didn’t have to collect; I have a job, I’m married to a doctor. I’m very comfortable. The dynamic changes completely when you’ve got kids to support, there aren’t many jobs in your community and this is it. Then, you better get good at figuring out whatever it is you have to say in order to get that money.
[A]s soon as you get on the phones with these people, it’s totally apparent that these are not people who have money. I’m talking to senior citizens who are living on Social Security, or a woman who is bipolar, so part of you kind of cringes at having to collect on them.
Q: Was it weird that they have no stake in whether the debt they’re trying to collect is valid?
A: I asked Brandon, and he said that most of the time he believed in the debts he was collecting on; that it wasn’t the wrong person or whatever. But when I pressed him about the amounts, he said, “We have no way of knowing if those amounts are accurate.” This is the guy collecting on them!
Q: How little information does he have to work with?
A: Ironically, this is called “paper,” but he has no paper; all he has is a spread sheet. He doesn’t have any of the account statements, the original contract. The funny thing is, Brandon would be the first to say, “This doesn’t help the consumer, but it doesn’t help me, either, because I’m collecting on something that I don’t have much sense of.” Then there’s the whole other issue of collectors ending up with debt that has been double or triple sold, on which multiple people are trying to collect at once. You get the sense this is a fairly chaotic situation.
Q: Are there any women in this world?
A: Not a ton of women, no. I met one woman at one of the big agencies who talked about how, when she first started on the job, she went home and cried everyday because she just hated what she had to do. But she told me, “You have to empathize with the debtors but not have sympathy, because if you have sympathy, you don’t get paid.” When you talk to people on the front lines actually doing it, it isn’t easy work for them.
Q: You point to an obvious solution to all of this turmoil: a global debt registry. Explain what that is.
A: When you say the word “regulation,” it immediately sets off these kind of partisan tones, but I’m not a political writer. I really look at this as common sense. The analogy I use is, say you want to sell me a car. I say, “OK, do you have any papers? Chain of title? Registration?” And you say, “No, no, I promise you, this car is mine. Just give me the cash quickly and we’ll be done.” “Well, is there a VIN or DMV number?” “No, there’s no DMV.” You’d say that’s crazy; people can’t buy and sell cars like that. But that’s exactly what’s going on here with consumer debt: buyers are buying on faith and sellers don’t have much to show and there’s not much documentation. What happens is, it puts consumers in this weird spot where they’re being asked to pay debt but they don’t know if the person on the other end really owns this debt or whether the amount is accurate. It also puts the collectors in a bad situation.
Q: How could banks and credit card companies help solve the debt collection dilemma?
When you talk to people on the front lines actually doing it, it isn’t easy work for them.
A: There are some simple fixes. One thing they could do is sell the debt once, to one place that is reputable. Because there are debt collection companies out there that run really clean operations. The problem is, when it’s bought and sold half a dozen times, it ends up in very unsavory places.
Q: Having immersed yourself in this industry, what would you do if you were being hounded by a debt collector?
A: I would ask for an address. I would request they send me a validation letter with the exact amount that I owe and includes any and all supporting evidence they have, including statements and an original signed contract. I would also want to know that the debt is within statute, which usually runs out after three to five years. And then I would simultaneously write them a cease and desist letter, which would mean it would be a violation of federal law for that particular agency to continue to contact me. If I feel like they’re legitimate and could really give me a receipt that I paid it, then I might go ahead and pay it. But once I paid it, I would take the receipt that I received from them and send that to the major credit rating agencies.
Q: In other words, you need good paper to fight bad paper?
Q: Are you optimistic that the Consumer Financial Protection Bureau will come up with a solution to the debt collection quagmire?
A: I think that they are. They’re making good progress with things like their online Consumer Complaint Database where you can search information about collection agencies and see the complaints. They brought a lawsuit against a major legal debt collection operation that was suing like 10,000 debtors a month, and they’re going after these guys hard. The problem, of course, is the sheer number of collection agencies; they’re policing the largest 175 and there are almost 10,000 of these agencies. Then it really falls on the state attorney general offices to go after these smaller operators, and I think that is hard. Right now, I think they’re outgunned.
Q: Should we look for that screen version of “Bad Paper” anytime soon?”
A: In the end, the HBO series kind of foundered. But after Time magazine excerpted the book, there has been a flurry of feature film interest. We’ll see if it pans out.